The government is seeking to close a loophole that allows companies that have negotiated a pay rate with their workers to then pay labour hire contractors less for the same job.

But the eight industry groups representing hundreds of businesses said the "same job, same pay" reform is a retrograde policy that will deny contract workers the ability to negotiate "more pay for harder work".

"It means by law, employers will have to pay workers with little knowledge or experience exactly the same as workers with decades of knowledge and experience," they said in a joint statement on Monday.

"It means by law, you cannot earn better pay by working harder or longer, if your colleague does not share your ambition or work ethic."

'Same job, same pay' will take away worker incentive and reduce productivity, they argued.

The employer groups are the Australian Chamber of Commerce and Industry, Australian Petroleum Production & Exploration Association, Business Council of Australia, Council of Small Business Organisations Australia, Master Builders Australia, Minerals Council of Australia, National Farmers Federation and the Recruitment, Consulting & Staffing Association.

But Treasurer Jim Chalmers rejected suggestions the laws would impact on productivity.

"What we're talking about here is making sure that labour hire or casual work or gig work is used the right way and not the wrong way," he told ABC Radio on Monday.

"It's not unusual or uncommon for employer peak groups to express a view about industrial relations, there'll be areas where we've got similar views and there'll be some areas where we don't, we're realistic about that."

Dr Chalmers said talks will still be carried out with business groups and unions to finalise the changes before they come into effect.

He denied the changes would stop businesses from rewarding experience in the workplace.

"It's about making sure that workers are eligible for the pay and conditions that the employers have agreed with their workforces," he said.

"We don't want to see it used as a sort of an ongoing way to undermine and undercut people's pay and conditions that have been negotiated with employers."

But ACCI chief executive Andrew McKellar said labour hire employees were erning more than their permanent counterparts.

"Claims that labour hire workers across the economy are paid less than employees are patently false," he said.

National Farmers Federation chief executive Tony Mahar said the change would create red tape for farmers who "don't have lawyers or an HR department".

Meanwhile, Master Builders Australia acting chief executive Shaun Schmitke said the use of independent and subcontract workers in the industry was a long-standing and legitimate arrangement.

"The policy is not about closing a 'loophole' rather it ties the hands of the building and construction industry at a time when communities are crying out for more housing and projects to be delivered," he said.

The workplace reforms are due to come into force by the end of the year.

Australian Associated Press